Hello, I am currently looking at the building contract for a new home and land package. The builder stated $30/day in liquidated damages. Build cost is about $600,000.
I've asked to increase this amount to $100 per day, and this is the response I received:
"Management disagrees, our standard amount for Liquidated damages is $30/day."
Considering I would still need to pay rent/mortgage even if the construction is delayed, what is a reasonable amount per day for liquidated damages?
Thanks
As you don't buy/own the policy, do you haven't any sway over the sum insured?
Isn't it the builder to buys it the sum insured/premium is based on the contract price?
Yes but there are limitations that can be added by the builder . Ex upto certain amount
Ask it to be open ended and of higher amount. Worst case pay it urself. It mustnot be so high
OK thanks for the tips.
I think that's a different kettle of fish. This is purely related to build delays, not if the builder goes bust.
It doesn't matter what is reasonable.
If they reject $100 per day (which I think is a reasonable figure for rent), you either accept $30 per day, threaten to find a new builder, or actually find a new builder.
They know after all the time, effort and emotional attachment you have with the property, you won't walk away.
Additionally, they probably hold copyright over the plans that you have come to an agreement, so you - technically - cant go and do the same plans elsewhere.
And if you cancel, they will check in a few years time to ensure you haven't stolen their IP.
they actually check?
gosh
@FoxJump: A quick Google street view costs nothing to check.
They could potentially gain $50k, $100k (or even more for larger projects) by suing the homeowner so they do check.
@FoxJump: By changing just a little, you're playing with fire, you want a material change.
Plus they can also check with council the internal layout of the property.
Depends on whether you have used one of their designs, or they have designed for you. If latter, you can make a case for owning the background IP, so minimal changes required to kill any lawsuits
@mattmel96: No way with a builder.
Even if you paid an architect to draw up a custom plan for one property, you can't then use the same plan to build a second house.
Liquidated damages should be a reasonable pre-estimate of loss. If it is not, it will either leave one party substantially under-compensated, or act as a penalty.
However, Jim is correct. If they won't agree, they won't agree.
$100 a day?
Who even suggested that….
$50 is generous if you get that.
The builds are now made to take 18-24 months on contracts. So they never get to the liquidated damages time.
Find a new builder.
LD's are not to be punitive but to cover your costs.
As architect, set LD's to cover usually the clients rent, some clients try to tack on storage, its needs to be fair.
And it never really covers your entire costs.
ie usually sits between 170-250 a day in Melbourne, maybe higher in Sydney.
I don't know what bargaining power you have with a volume builder though without a third party (ie. architect) etc acting as your superintendent, this is going to be same for variations etc.
$100/day is reasonable, but good luck getting them to change, home builders seem to hold all the cards when it comes to their contracts, unlike commercial building.
Ahh the world of builders.
Where everything is geared against the home owner, even to the point they can just ramp up costs with variations and you have to agree otherwise they walk away.
The contracts they draw up would never fly in government as the liability almost always falls on the client and the legal teams reject these terms.
Unfortunately due to how hot the market is they're bullying their clients and forcing them to take on these petty terms.
I remember during the last GFC builders were crawling over each other for work, had a work colleague who's terms were that the house was build in 6 months from slab pour or it was something like a $500 reimbursement per week and they would pay for your rent as they were all fighting for jobs. If only we returned to that market, maybe the quality of builds would improve…
maybe the quality of builds would improve…
This is a big thing these days… I'd hate to be building due to shit quality and massive chance they will go toes up before its finished anyway
I'd hate to be building due to shit quality and massive chance they will go toes up before its finished anyway
100%, with the added bonus that they'll keep you in the lurch for 3 years while they finish other "higher priority" builds.
Basically government offered hundreds of millions in subsidies, increased the load on builders four-fold and is now wondering why no one can finish builds and why construction costs have gone through the roof.
I remember seeing the stat that the number of houses under construction is enough to actually solve a lot of the housing crisis if they were finished on time. It's the backlog and families effectively double dipping with a rental and property under construction for an extended period of time that is pressuring the housing market, oh and excessive immigration.
The government really is its own worst enemy.
Interesting point about the impact of long build time on rental availability
@pharkurnell: Yep, these are the Lobbyists who are churning out subpar builds, phoenixing companies, passing themselves off as the saviours to Australia's immigration problem, pumping up prices artificially whilst selling them to international buyers who are more interested in cleaning their money. Only to then complain that they're not making any money whilst also pushing the government to subsidise the industry due to lack of liquidity.
How to create a ponzi scheme 101
Ask them to go unliquidated…..
Increase ur build insurance amount (Victoria Equivalent is VMIA) to reflect something more in your favour incase the builder goes down